Dear Colleagues

 

BT Salary Sacrifice ("Mobile Worker Payments")

 

BT has launched its new Salary Sacrifice scheme this week.  The company invited the CWU to enter into an agreement on the scheme, but we have declined to do so.

 

This note sets out why, prior to launch, there has been a negotiating process and the company has clearly signalled its intentions and timescales with regards to the Mobile Worker Payment. The proposals changed in a number of areas as a result of CWU interventions.  

 

It is unfortunate that we have not been able to make sufficient progress to be able to signal our agreement to the proposals

 

In looking at the merits or otherwise of BT's proposals, the TFSE was swayed by arguments of principle and ethics as well as practical considerations.

 

In the past, we have not sought benefit for our members through salary sacrifice.  We have come to agreements on company initiatives with appropriate safeguards.  We have never been at ease with tax/National Insurance avoidance schemes.  Our view is therefore that the proposed Mobile Worker allowance is a step too far.

 

Without the counterweight of a compelling social argument, we were also swayed by the view that although the HMRC (the new name for the Inland Revenue) may appear to have endorsed such schemes, it does create a tax shortfall that would have to be made up from other source or alternatively result in a reduction in public expenditure.  We do not believe it is appropriate to endorse a scheme in these circumstances.

 

Additionally, there seems to be nothing that differentiates or distinguishes this particular occupational group from any of their peers who also do not benefit from subsidised canteen for subsidence during the day.

 

We also took this decision in cognisance of two matters that we feel to be particularly important from a practical point of view.

The first relates to publicity in the national media from January* this year which raised concerns about the future of salary sacrifice schemes.  Our fear is that without explicit protection being offered by the company in the event of HMRC seeking retrospective tax payments on salary that has been "sacrificed", we could be exposing our members to a future tax liability and detriment.  In such circumstances we could not countenance giving our agreement to such a scheme.

 

The second practical consideration relates to the individuals who may suffer a detriment to their secondary state pension or S2P as a result of participation in this scheme.  We do not believe that it is possible to offer a cast-iron protection against detriment for this group because each person's circumstances would be different and distinct.  We therefore argued that the only appropriate manner of running such a scheme was to provide the maximum possible level of information and then giving such individuals the opportunity to opt-in, rather than opt-out.

 

We believe that this is particularly the case because one of the main areas of uncertainty is the cost of the annuity it would be necessary to purchase to offset the detriment to S2P caused by participation in this scheme by certain members of the BTRP. 

 

While the current cost of purchasing an annuity to cover a shortfall of around £250 per annum in S2P is roughly twenty times the detriment, or slightly over £5000, our experts advise us that this is by no means a certain figure and is highly likely to rise sharply given revised estimates of life expectancy.

 

It is not impossible to envisage a situation where the cost of the annuity will match or even eclipse the financial benefit that you have described as deriving to members from the operation of such a scheme. This is especially likely in cases where members are participating in multiple salary sacrifice schemes.

 

Given that the financial proceeds to the company of operating such a scheme seem particularly attractive, we are disappointed that the company has not accepted our arguments about the value of funding an opt-in arrangement for people in this category. We are also concerned that our members will not be able to make a "like for like" comparison of take home pay contrasted with pension benefit.

 

We encouraged the company, until the point of publication, to reconsider its position on the key points of concern to us.  Although a commitment to a joint review has been offered, and although the company say they will be advising those they see as not benefiting from the MWP not to participate, we strongly recommend our members not to participate in this Salary Sacrifice scheme.

 

Yours sincerely,

 

 

 

Simon Sapper
Assistant Secretary

* "The Daily Telegraph" of 30 January.